Pre-emption right

A pre-emption right is a right to acquire certain property in preference to any other person. It usually refers to property newly coming into existence. A right to acquire existing property in preference to any other person is usually referred to as a "right of first refusal".

In practice, the most common form of pre-emption right is the right of existing shareholders to acquire newly issued shares issued by a company in a rights issue, a usually but not always public offering. In many jurisdictions this is automatically provided for by statute, for example the UK, but in other jurisdictions it only arises if provided for under the constitutional documents of the relevant company, for example the US.

Other situations in which pre-emption rights are seen to arise are in property developments; parties close to the investors are often given a right of pre-emption in relation to new flats or condominiums within a development.

Overall, pre-emption right is similar to the concept of a call option.

Historical meanings

In earlier time, "pre-emption right" has had a separate and distinct meaning to that given to it today. [ [http://www.lectlaw.com/def2/p136.htm www.lectlaw.com] ]

Under international law, the right of preemption formerly referred to the right of a nation to detain merchandise passing through her territories or seas, in order to afford to her subjects the preference of purchase. This form of right was sometimes regulated by treaty. A treaty between the United States and Great Britain in 1794 agreed that "whereas the difficulty of agreeing on precise cases in which alone provisions and other articles not generally contraband may be regarded as such, renders it expedient to provide against the inconveniences and misunderstandings which might thence arise. It is further agreed that whenever any such articles so being contraband according to the existing laws of nations, shall for that reason be seized, the same shall not be confiscated, but the owners thereof shall be speedily and completely indemnified; and the captors, or in their default-the government under whose authority they act, shall pay to the masters or owners of such vessel the full value of all articles, with a reasonable mercantile profit thereon, together with the freight, and also the damages incident to such detention."

In the United States in the eighteenth century, the right given to settlers of public lands, to purchase them in preference to others, was called the preemption right.

ee also

*Preemption Act of 1841 (U.S. land transfers)
*Option (finance)
*Right of first refusal
*Drag-Along right
*Tag-Along right

References


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Look at other dictionaries:

  • pre-emption right — /pri: empʃən raɪt/ noun the right of an existing shareholder to be first to buy a new stock issue …   Dictionary of banking and finance

  • right of pre-emption — Also known as a right of first refusal. This is the right to be offered a property first, should the owner decide to dispose of it. Such a right may be agreed expressly between parties, or it may arise under statute. A right of pre emption will… …   Law dictionary

  • pre-emption law — pre|emp|tion or pre emp|tion «pree EHMP shuhn», noun. 1. U.S. and Canada. the act or right of purchasing before others or in preference to others: »It is neither right nor legal that Mr. Hardy s preemption should gobble up over 250 acres of hay… …   Useful english dictionary

  • pre-emption rights — Where a company proposes to issue new shares, existing shareholders may have the right to be offered a pro rata part of the new shares before they are offered to a new shareholder. The rights are contained either in the Articles of Association or …   Law dictionary

  • pre-emption — (n.) also preemption, c.1600, lit. the right of purchasing before others, from PRE (Cf. pre ) before + EMPTION (Cf. emption) …   Etymology dictionary

  • pre-emption — 1. the right of buying before anyone else. 2. in international law, the right of a state to buy the property of another power in transit over its territory (or allow its own nationals to buy it). 3. in the USA, laws passed from 1841 onward… …   Law dictionary

  • pre-emption rights — When a UK company issues new shares, it is obliged by law to give existing shareholders the opportunity to purchase the new shares on a pro rata basis to their existing shareholding in the company. This right is usually implemented by means of a… …   Financial and business terms

  • right of pre-emption — See pre emption …   Ballentine's law dictionary

  • pre-emption — noun 1》 the purchase of goods or shares by one person or party before the opportunity is offered to others.     ↘historical, chiefly N. Amer. & Austral./NZ the right to purchase public land in this way. 2》 the action of pre empting or… …   English new terms dictionary

  • pre-emption — /pri ˈɛmpʃən/ (say pree empshuhn) noun the act or right of purchasing before or in preference to others. {pre + Latin emptio a buying} …   Australian English dictionary

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